Webinar: Special Session Outcomes July 22, 2011

Transcription

1 Webinar: Special Session Outcomes July 22, First Special Session Recap Intergovernmental Relations Staff, League of Minnesota Cities 7/22/2011

2 2011 First Special Session Overview How we arrived at Tuesday s Special Session: No budget agreement on May 23 Governor vetoed 8 budget bills and the tax bill Negotiations through June did not yield an agreement between Governor and legislators On June 13, Attorney General petitioned the courts to intervene to maintain core functions of government related to health and safety

3 2011 First Special Session Overview June 28 Court agreed and ordered that certain state functions be funded The order included standing appropriations such as LGA, MVHC, UVTA and PERA aid Established a special master process to consider whether other services should be funded July 1 Most state agencies, except Department of Agriculture, and functions within some agencies deemed by the court to be core, were shut down After the July 1 shutdown Special master defined a limited number of additional functions to be core.

4 2011 First Special Session Overview July 14 July 19 June June 20 Governor announced he would agree to the basics of the last offer of the House and Senate Governor called a special session Legislature passed bills Governor signed those bills into law

5 2011 First Special Session Overview 12 new chapters 1,101 pages $5 Billion Amount of the deficit that the appropriations adjustments aim to address

6 Solving the $5 billion deficit Spending Area Deficit Impact K-12 Education -2, % Higher Education % Taxes, Tax Aids and Credits % Health and Human Services -1, % Environment/Energy % Agriculture % Transportation % Public Safety % Jobs and Econ Development % State Government % Tobacco Bonds NA Other and Revenue increases NA Total -5, % Percent Change from current law

7 So what became law?

8 Public Safety/Judiciary Fire Safety Account 911 Fees Office of Justice POST Reimbursement

9 Public Safety/Judiciary $3.7 million shift from Fire Safety Account to general fund No shift of dedicated 911 fees used to fund the Allied Radio Matrix for Emergency Response (ARMER) $2.66 million reduction to the Office of Justice Programs $450,000 reduction in training reimbursement through Peace Officer Standards and Training Board (POST)

10 Environment and Natural Resources MPCA s water program- $3.1 million less in cuts DNR Ecological Services and Waters division -- $5.2 million less in cuts

11 Transportation Greater Minnesota Transit Met Council - CTIB MSA CSAH Trunk Highway

12 Transportation $2.7 million reduction to Greater Minnesota transit Reduction of $ million to Metropolitan Council transit and rail operations Revenue collected by the Counties Transit Improvement Board (CTIB) must be allocated to the Metropolitan Council in fiscal years 2012 and 2013 an amount not less than 75 percent of the net cost of operations for those transit ways that were receiving metropolitan sales tax funds through an operating agreement on June 30, 2011 Stable funding for state highways, Municipal State Aid (MSA) and County State Aid Highways (CSAH) $127 million in Trunk Highway funds for the biennium for the Better Roads Program

13 Economic Development Competitive Grants - Housing - Building Permit Surcharge - Investment Funds

14 Economic Development Minnesota Housing Finance Agency budget increased by $300,000 for FY12-13 Competitive grant programs: business development, adult workforce development and youth workforce development Economic Development & Housing Challenge Program decreased by $4.7 million over the next biennium $2 million for the Redevelopment fund in general fund dollars $3 million for the MN Investment Fund $6.2 million for the Contaminated Site Clean-up

15 Economic Development The temporary building permit surcharge fee increase to $5 that expired on June 30 is back in effect and extended to June 30, The effective date is retroactive to July 1, Cities that collected the lower 50 cent surcharge are expected to bill the permitee for an additional $4.50.

16 Legacy Funds to the Public Facilities Authority for city infrastructure to deal with impaired waters remained $16.71 million per year Funding for a study to determine appropriate state sulfate standards to protect wild rice received a total of $1.5 million Direct advisory responsibilities for all funds distributed from the clean water fund goes to Clean Water Council

17 Taxes LGA MVHC Local Option Sales Tax MOE Holding Period Online Lodging Taxes

18 Taxes-Local Government Aid 2011 LGA cut by roughly $102 million Each city will receive the lesser of their 2011 certified LGA amount or their final 2010 LGA after the cuts imposed by the governor and legislature in LGA for cities under 1,000 population and below average tax capacity per capita ($1,157/pc) was generally not cut in 2010 but if a city s LGA was scheduled to increase in 2011, you will be reduced to the 2010 level. You will be receiving a letter from the Department of Revenue announcing the 2011 cuts.

19 Taxes-Local Government Aid Payment Timing: July 20, 2011 July 27, 2011 The first installment of 2011 LGA will be delayed by one week and will now be paid next Wednesday. The July and December payments will therefore reflect the reduction just enacted by the legislature and governor. In 2012, each city will receive the amount of LGA received in You will be receiving your annual LGA certification notice as scheduled around August 1. For 2013 and beyond, the LGA appropriation will be set at $426 million and the formula will again be used to distribute the funds.

20 Taxes-Market Value Homestead Credit Extends the 2010 supplemental budget MVHC reimbursement reductions for The language states that the reimbursement paid to each city and county.may not exceed the reimbursement payment received by the city or county for taxes payable in This reduction is estimated to total $48 million and when coupled with the permanent, $25 million MVHC cut for more than 123 cities that was enacted when the governor s unallotments were ratified, only about $12 million, or 15 percent of the actual reimbursement due to cities will remain.

21 Taxes-Market Value Homestead Credit If a city s MVHC reimbursement increases in 2011 over the 2010 level, the reduction to a city can increase. Conversely, if a city s MVHC reimbursement in 2011 decreases, the reduction can decrease.

22 Taxes-Market Value Homestead Credit In place of the MVHC, homeowners will receive an exclusion of a portion of the market value of their house from property taxes. For homes valued at less than $76,000, the exclusion is equal to 40% of the home s market value. For homes valued between $76,000 and $413,800, the exclusion is $30,400 minus 9% of the value over $76,000. Market Value $76,000 $150,000 $300,000 $450,000 Current MVHC $304 $ $102.4 $0 MV Exclusion $30,400 $23,740 $10,240 $0 MV after exclusion $45,600 $126,260 $289,760 $450,000

23 Taxes-Market Value Homestead Credit The new market value exclusion for homes will mean that beginning in 2012, your tax base will be reduced and your tax rate will rise Although the homestead exclusion is computed in a mathematically similar manner to the repealed MVHC, the new system will shift taxes among properties within each community Keep in mind that $261 million per year in current state funding for the MVHC credit reimbursement is being eliminated and therefore property taxes will be higher than under the current credit system.

24 Taxes-Local Sales Taxes Modifies or Authorizes local sales taxes for: Fergus Falls Hermantown Hutchinson Lanesboro Marshall Medford Rochester Clearwater Cloquet Prohibits local governments from spending to promote a local sales tax and limits spending to the costs of conducting the required referendum Requires the referendum be held before coming to the legislature for authorization

25 Taxes Maximum allowable holding period for property that is held by a city for economic development to be exempt from property taxation, when the property is located in the metropolitian area, or in a city of 5,000 or more outside the metro area increases from 8 to 9 years Sellers of lodging, including online sellers, must collect the sales tax on their total charge to the customer, including any service charges paid by the customer related to the sale of the lodging 10% reduction for cities and counties library MOE requirement

26 Pensions Pension Assumptions Minneapolis Fire Relief/Police Relief Small Plans

27 Pensions Revised salary scale and payroll growth rate actuarial assumptions used Authorizes consolidation of the Minneapolis Firefighters Relief Association and the Minneapolis Police Relief Association with a statewide plan Other stand-alone bills that impact individual plan members or small plans

28 State Government State Employees Reimburse Elections Costs Fair Campaign Practices Buyer s Cards

29 State Government Authorizes state agencies to waive late fees in connection with the issuance or renewal of a license, permit, or registration if the lateness was due to the state government shutdown. No state appropriation may be used to pay or settle judgments for damages by contractors or third parties arising out of, or related to, the government shutdown unless the contract expressly provides for the payment. Allows the City of Rochester to use a private CPA firm to conduct the city s annual audit. As a new first class city, the city would have been otherwise required to use the state auditor.

30 State Government Appropriated $322,000 to reimburse counties for costs to conduct recount of 2010 state gubernatorial election Appropriated to $130,00 for Office of Administrative Hearings to cover costs to consider complaints of violations of the Fair Campaign Practices Act Includes a controversial tax compliance initiative that is expected to result in $82 million in new state tax compliance revenues for the biennium Expired Buyers Card can continue to be used to purchase liquor, beer and wine from the wholesaler until July 25 th

31 State Government Did not include a requirement included in the original vetoed state government finance bill that would have reduced state employee positions by 15 percent by Did not include a freeze on state employee compensation discussed in earlier legislation.

32 Bonding Flood - Wastewater - Development - Transit Ports - Forests

33 Bonding Flood hazard mitigation grants - $50 million Wastewater Infrastructure Fund grants - $20 million Greater MN Business Development Public Infrastructure grants - $4 million Innovative Business Development Public Infrastructure grants - $5 million Local Bridge Program - $33 million Local Road Improvement Program - $10 million Railroad warning device replacement to replace active highway railroad grade crossing warning safety devices - $3 million Greater Minnesota Transit for transit capital facilities - $2.5 million Transit Capital Improvement Program (Met Council) - $20 million Rehabilitate & modernize publicly owned airport runways - $3.7 million Port development assistance - $3 million

34 The Future The budget solution--at least on paper--results in a balanced budget. Relied heavily on one-time solutions including the school funding shift and the tobacco bonds. Based on current estimates, the next biennium ( ) is not so balanced. Current estimates show a deficit of $1.9 billion.

35 Questions?

36 IGR League Staff Gary Carlson, Director of Intergovernmental Relations (651) or Anne Finn, Intergovernmental Relations Assistant Director (651) or Jennifer O Rourke, Intergovernmental Relations Representative (651) or jorourke@lmc.org Ann Higgins, Intergovernmental Relations Representative (651) or ahiggins@lmc.org Craig Johnson, Intergovernmental Relations Representative (651) or cjohnson@lmc.org Heather Cederholm, Member Outreach Coordinator (651) or hcederholm@lmc.org